COMPETITIVENESS

STRATEGY
PRODUCTIVITY

Session-2-Module-1
 Overview of Competitiveness, Strategy &
Productivity
 Competitiveness

 Mission/Strategy/Tactics

 Operations Strategy

 Productivity – Definition, Measures of Productivity, Methods of improving

Productivity.

 Productivity in Service Sector

 Productivity and Goal (Eli Goldratt).

 Competitiveness

 Competitiveness: How effectively an organization meets

the wants and needs of customers relative to others that
offer similar goods or services
 Competing using Marketing: Identifying consumer wants
and needs, Pricing, Advertising and promotion
 Competing using Operations: Product and Service design,
Cost, Location, Quality, Quick response, Flexibility,
Inventory management, Supply chain management,
Service and Service Quality
 Mission/Strategy/Tactics

Mission Strategy Tactics

 Mission: The reason for existence for an organization, the

mission statement states the purpose of an organization &
the Goals provide detail and scope of mission
 Strategies: Plans for achieving organizational goals
 Tactics: The methods and actions taken to accomplish
strategies
 Mission/Strategy/Tactics

Mission

Goals

Organizational Strategies

Functional Goals

Finance Marketing Operations

Strategies Strategies Strategies

Tactics Tactics Tactics

Operating Operating Operating

procedures procedures procedures
 Mission/Strategy/Tactics

 Example: Student would like to have a career in business,

have a good job, and earn enough income to live comfortably
 Mission: Live a good life

 Goal: Successful career, Good income

 Strategy: Obtain an MBA education from reputed college

 Tactics: Select a reputed college and a specialization

 Operations: Register, buy books, take courses, study,

graduate, get job using college placements
 Operations Strategy

 Operations strategy: The approach, consistent with

organization strategy, that is used to guide the operations
function.
 Examples of strategies: Low cost, Scale-based, Specialization,
Flexible operations, High quality, & Service
 Quality-based strategies: Focuses on maintaining or improving
the quality of an organization’s products or services, Quality at
the source
 Time-based strategies: Focuses on reduction of time needed to
accomplish tasks
 Definition of Productivity

1. The term Production is absolute. While the term Productivity is

relative (output relative to input)

2. It is ratio of output & input

i.e. Productivity = (Measure of output) / (Measure of input)

3. Productivity can be defined as incremental change in output for a

unit change in input.

 Measures of Productivity

 Partial Measures

 Labor productivity = Output (units) / Labor (hours)

 Material Productivity = Output (units) / Material (kgs)

 Machine Productivity = Output (units) / Machine (hours)

 Multifactor Productivity Index = Output (units) / (Labor + Material + Machine)

 Total Productivity Index = Output (units) / (All inputs used)

 Methods of improving Productivity

 Increase the output for the same input (Quality

Management)
 Decrease the input for the same level of output
(Reducing Wastage)
 Small increase in input resulting in a substantial
increase in output (Capital Investments in new
facilities)
 Productivity in Service Sector

 More difficult to measure & manage because it involves

intellectual activities & high degree of variability: for example
medical diagnosis, consultancy & legal services
 Some of the factors that affect Productivity are Methods, Quality,
Technology & Management
 Standardizing Processes & Procedures where ever possible to
reduce variability can improve Productivity & Quality: for
example Burger Kings combined menu items in meal packages
such as a burger, fries & soft drink which reduced time to take and
process the order & this resulted in increased productivity
 Slide 12

Productivity and Goal (Eli Goldratt)

• Productivity is the act of bringing a company closer to its goal. Productivity

is meaningless unless you know what your goal is?

• List of all the items people think of as being goals: cost-effective purchasing,
employing good people, high technology, producing & selling quality
products, capturing market share and customer satisfaction.

• All of these are essential to running the business successfully. They enable
the company to make money. But they are not the goals themselves, they’re
just the means of achieving the goal.

• The Real Goal of the organization is “To Make Money” and all other things
are just ways to achieve that goal.
 Slide 13

Productivity and Goal (Eli Goldratt)

 If the goal is to make money, then, an action that moves us toward

making money is productive. And an action that takes us away from
making money is non-productive

 In order to know if we are making money, the minimum number of

financial measurements we would need to simultaneously increase
are net profit, return on investment and cash flow
 Slide 14

Productivity and Goal (Eli Goldratt)

 How to build a direct connection between the three financial

measurements and what goes on in the plant?
 The measurements which express the goal of making money perfectly
well, and which also permit us to develop operational rules for running
our plant are:
1. Throughput It is the rate at which the system generates money
through sales
2. Inventory It is all the money that the system has invested in
purchasing things, which it intends to sell.
3. Operational expense It is all the money the system spends in order to
turn inventory into throughput.
 Slide 15

Productivity and Goal (Eli Goldratt)

• The Goal is to increase throughput while simultaneously reducing

both inventory and operating expense. Each one of those definitions
contains the word money.
1. Throughput is the money coming in.
2. Inventory is the money currently inside the system.
3. Operational expense is the money we have to pay out to make
throughput happen.
• One measurement for the incoming money, one for the money still
stuck inside, and one for the money going out.”